Is that a bank account or a lottery ticket?

Debnath Guharoy,

The penetration of the major financial products in Indonesia today is still very low.

We know that only one in five people above the age of 14 have a bank account, any kind of transaction account. Some have more than one account, some have several, in more than one bank. This is not an easy phenomenon for Bank Indonesia to monitor, much less for any one bank to understand, simply because the total number of accounts opened is not the same as the total number of people with bank accounts

The sixth in a series on Indonesia today, this report will dwell on consumer banking. The information is based on Roy Morgan Single Source, a national survey with 25,000 respondents annually, covering 90 percent of Indonesia's population over the age of 14, the widely accepted minimum age to legally earn a living.

Clouding the market is the practice of bribing the customer to open a deposit account. In the guise of "promotions", luxury cars and large cash prizes are given away each year for depositing as little as Rp 250,000 for just six months.

If a superstitious breadwinner had Rp 1 million to deposit, he could easily get the four "lottery" tickets issued in the name of three other family members by opening not one but four accounts of Rp 250,000 each. But do these four people really consider themselves account holders at the bank that has recorded four customer identification numbers in their names?

How many of these accounts are in fact active? How many of these deposits remain in the bank after the "lottery" has been drawn and the winners announced? Promoting a culture of disloyalty does not augur well for the future of consumer banking, nor does it add equity to the brand.

It is a vicious cycle that commissioners need to ask bank executives to break.

Product differentiation is the key to winning new customers and good service the key to keeping them. When was the last time anyone noticed a novel and viable new offering to try and convert this largely cash-only society to banking? How many banks are there that know how many of their customers are SMEs, whose families and friends can be drawn into the fold?

The easiest thing for an expatriate consultant to do is to grandly announce that they are only going to focus on the `affluent' market, so that old ideas overseas can simply be recycled in Indonesia without even bothering to understand the market. For a state-owned bank, that is an unforgivable agenda.

Realistic key performance indicators (KPIs) need to be set, and these indicators need to be monitored, reported and acted upon to the satisfaction of shareholders. There is little transparency today, with bank executives keen to keep their own directors in the dark, not to mention their shareholders.

The top-4 banks collectively enjoy the lion's share of the consumer banking market ever since the mergers post-1997. This iron grip is unlikely to weaken, despite the scandals and upheavals witnessed in recent times.

In fact, further consolidation is possible. This is reflected in the Main Financial Institution (MFI) status that these big banks enjoy in the minds of the customers, influenced by where their salaries are received each month.

Top 10 banks: Main Financial Institutions

No. Main Financial Institution No. of customers in '000

1 Bank Rakyat Indonesia 17,736

2 Bank Central Asia 4,190

3 Bank Negara Indonesia 3,768

4 Bank Mandiri 1,767

5 Bank Pembangunan Daerah 815

6 Bank Perkreditan Rakyat 570

7 Bank Lippo 528

8 Bank Danamon 379

9 Bank Internasional Indonesia 222
10 Bank Tabungan Negara 207

Base: Indonesian 14+
Sample size: n=25,182
Timer Period: October 2005-September 2006

Without exception, the percentage of customers with the top-4 banks who treat them as their MFIs is growing steadily. But the public's opinion of the top-4 consumer banks varies dramatically, a humbling verdict for most.

BRI's heritage of micro-savings and loans has fostered a culture of greater loyalty than is enjoyed by any other bank in the country. To its credit, it is seen to be capable of taking care of the full range of its customers' financial needs. BCA's professional standards are noteworthy. This bank is also well known for its comprehensive online services.

Poor service, poor reputation and high fees and charges are the key complaints of most customers. These are the fundamental reasons for switching, with too many customers intending to leave in the hope of finding better service.

Flip the reasons for switching around and then we have the ways to keep customers satisfied. Simple, but not surprising. More ATMs, phone banking and internet banking, with more services like bill payment via these facilities, are welcome bonuses for customers.

After all, three out of four customers don't want to visit a branch, physically. When the bank's customers are satisfied, so will the shareholders and staff, as well.

The contributor is an advertising professional turned researcher and consultant, based in Melbourne. He has lived and worked across the Asia Pacific region, including Indonesia. He remains a regular visitor.
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